The IMF remains unconvinced that inflation had fallen below 30 percent

We have had a busy week. The joint International Monetary Fund (IMF) – World Bank meetings took place in Bangkok. Various reports were published, and warnings were issued regarding the future of the global economy. It was emphasised that artificial intelligence could pose a disruptive threat to employment, and that rising bond yields were increasing financial risks. It was noted that, due to high public debt, resurgent inflationary pressures and rising borrowing costs, there is a narrower scope for supporting the economy in the face of potential shocks.

What was significant for Turkey, however, was that the IMF did not believe inflation would fall below 30 percent. In the October edition of the World Economic Outlook – a report published twice a year to update forecasts for the global economy – the IMF raised its year-end inflation forecast to 31.2 percent. The previous forecast, published in April, had been 28.6 percent.

However, as of September 2026 – 57 months later – the annual inflation rate had fallen below 30 percent, standing at 29.73 percent. This marked the first time since December 2021 that inflation had dropped below the 30 percent level.

As is well known, whilst the year-end inflation target was set at 28.4 percent in the Medium-Term Programme (MTP) updated in September, the Central Bank projected a year-end figure of 28 percent in its latest inflation report update.

The week’s key developments are as follows:

IMF raises inflation forecast for the Turkish economy, lowers growth forecast

The International Monetary Fund (IMF) has raised its global economic growth forecast for this year from 3 percent to 3.1 percent. Growth of 3.4 percent is expected next year. The IMF published the October edition of its World Economic Outlook Report.

The report stated that the Turkish economy is expected to grow by 2.7 percent this year and 3.6 percent next year. In its July forecasts, the IMF had projected that the Turkish economy would grow by 2.9 percent in 2026 and 3.6 percent in 2027. It was noted that Turkey’s average inflation forecast for 2026 is expected to be 31.2 percent and 26.5 percent for 2027.

The year-end inflation forecast for Turkey in 2026 has also risen to 31. 2 percent. The year-end forecast for 2027 was recorded as 26.5 percent. The previous report had forecast year-end inflation in Turkey at 28.6 percent for 2026 and 21.4 percent for 2027.

Global inflation is also expected to rise

The report stated that global headline inflation is expected to rise to 4.7 percent in 2026, largely due to the impact of a temporary increase driven by energy and food prices, before falling to 4.1 percent in 2027. The report indicated that growth in global trade volumes is expected to slow in 2026 before stabilising in 2027, noting that this outlook is influenced by the negative impact of tariffs, the adjustment process within supply chains, and the continued strong performance of technology-related trade.

The report stated that global imbalances are expected to decrease only moderately in the medium term, whilst the medium-term growth outlook is set to remain weak by historical standards and continue to diverge across countries.

The report, which highlighted a downward bias in risks, warned that the continuation of a prolonged stalemate in the Middle East or a further escalation of tensions could lead to energy and food prices remaining high and volatile, a resurgence of inflationary pressures, a deterioration in fiscal and external balances, and a dampening of growth.

Growth forecast for the Eurozone revised upwards

The report, which also set out economic growth forecasts for individual countries, stated that the growth forecast for the US economy – a member of the group of advanced economies – remained at 2.3 percent for this year, whilst the forecast for next year was raised from 2.2 percent to 2.3 percent.

The report noted that the growth forecast for the Eurozone economy has been raised from 0.9 percent to 1.1 percent for this year, whilst the growth forecast for the region’s economy next year has been kept steady at 1.2 percent.

The report stated that Germany’s growth forecast had been raised from 0.7 percent to 1.3 percent for this year and from 1 percent to 1.1 percent for next year, whilst the growth forecast for the French economy had been lowered from 0.6 percent to 0.4 percent for this year and from 0.9 percent to 0.7 percent for next year.

The report noted that the growth forecast for the Italian economy has been raised from 0.5 percent to 0.8 percent for this year, to 0.6 percent for next year, whilst the growth forecast for the Spanish economy has been raised from 2.1 percent to 2.5 percent for this year and remains at 1.8 percent for next year.

The report states that the growth forecast for the UK economy has been raised from 1 percent to 1.3 percent for this year, whilst it has been lowered from 1.3 percent to 1.2 percent for next year; it was noted that the growth forecasts for the Canadian economy remained at 1.1 percent for this year and 1.7 percent for next year, whilst the growth forecast for the Japanese economy was raised from 0.6 percent to 0.7 percent for this year and kept steady at 0.7 percent for next year.

China’s growth forecasts have been lowered

The IMF report stated that, within the group of emerging markets and developing economies, the growth forecast for the Chinese economy has been revised downwards from 4.6 percent to 4.5 percent for this year and from 4.1 percent to 4 percent for next year. The report also noted that the growth forecast for the Indian economy this year has been raised from 6.4 percent to 7 percent, for next year from 6.7 percent to 7 percent, whilst the growth forecast for the Russian economy has been revised downwards from 1.1 percent to 0.9 percent for both this year and next year.

Room for manoeuvre is rapidly narrowing

The report noted that whilst the global economy has once again demonstrated its resilience, this resilience is not evenly distributed across countries, and that in the short term, economies’ room for manoeuvre is rapidly narrowing.

The report noted that, despite ongoing pressures stemming from the protracted war in the Middle East and trade tensions, economic activity in the first half of 2026 had performed better than expected, and that the technology cycle, driven by strong investment in artificial intelligence, had created momentum supporting demand.

IMF Managing Director concerned about the “tsunami” effect of artificial intelligence on employment

In her first speech at the IMF and World Bank annual meetings, IMF Managing Director Kristalina Georgieva said of artificial intelligence: “This is a slow-moving tsunami, but it is still a tsunami.”

Speaking at a session on the impact of artificial intelligence on employment, the IMF Managing Director noted that this technology is already reducing demand for labour by taking on routine and repetitive tasks. Drawing attention to the fact that it is also increasing the number of low-paid jobs in sectors such as construction, she stated that this was ‘not a cause for celebration’.

Noting that this represents a transformation with far-reaching implications for public finances, Georgieva commented: “Today, we cannot imagine exactly what the world of work will look like in five years’ time. However, we can act with discipline, carefully assess what is happening, learn lessons from it and, most importantly, take immediate action in line with those lessons.”

Warning on artificial intelligence, interest rates and cyberattacks for financial stability

In the October issue of its Global Financial Stability Report, titled ‘Resilience, Risk and Transformation’, the IMF warned that risks to global financial stability posed by artificial intelligence-induced market corrections, sharp rises in government bond yields and cyberattacks are increasing.

It was noted that global financial markets have maintained their resilience, supported by strong economic growth and corporate profitability, and that financial conditions have remained relatively favourable; however, three key risks – an AI-driven market correction, a sharp rise in government bond yields and cyberattacks – are on the rise.

$650 billion in borrowing against $1.4 trillion in revenue commitments

The report highlighted that should these risks combine with existing vulnerabilities in the financial system, they could trigger more widespread financial stress; it emphasised that high levels of debt, liquidity shortages and strong interconnections between markets could amplify the impact of potential shocks, turning them into broader financial pressures.

It was also noted that cyclical financing arrangements based on equity and debt flows amongst companies in the artificial intelligence sector pose a risk: “Our analysis of 14 such transactions since 2023 revealed that approximately $300 billion in equity investment and $650 billion in debt financing were raised in exchange for future revenue commitments totalling $1.4 trillion.”

The report noted that, as the financial sector becomes increasingly digitalised and interconnected, cyber-attacks have become a growing source of systemic risk, emphasising that a major attack could bring payment systems, trading operations, access to deposits and other critical financial services to a standstill.

IMF warns that rising bond yields are increasing fiscal risks

The IMF reported that rising borrowing costs during periods of high indebtedness increase the pressure on public finances and make credible fiscal consolidation measures more urgent. In a blog post accompanying the Fiscal Monitor Report, the IMF noted that high and rising debt levels intensify the interaction between fiscal policy and interest rates.

The post highlighted that, in situations where debt levels are already high, increases in policy interest rates further exacerbate budget deficits and the debt stock, whilst emphasising that high debt levels also make market interest rates more sensitive to fiscal developments.

The post highlighted the sharp rise in long-term government bond yields in major advanced economies, noting that between February and September, the average yield on 10-year government bonds in G7 countries rose by more than 1 percentage point to reach its highest level in nearly 20 years. The article underlined that global public debt is expected to exceed 100 percent of global Gross Domestic Product (GDP) by 2030, recalling that this level was last reached immediately after the Second World War.

AKP’s fund proposal passes committee: interim payments of up to 1 million lira

A bill containing regulations regarding certain investment funds slated for liquidation has been approved by the Turkish Grand National Assembly’s Planning and Budget Committee. The bill provides for interim payments of up to 1 million lira for investors with a net investment amount below 1 million lira, and a maximum of 1 million lira for those with a net investment amount of 1 million lira or more.

AKP Group Chairman Abdullah Güler provided details on the content of the regulations at a press conference held prior to the bill being submitted to the Speaker of the Assembly, and announced that public funds would not be used during the liquidation process of the funds.

Noting that the regulations provide investors with the option of an “interim payment of 1 million lira”, Güler stated, “We will tackle the problem head-on and root out the virus. Investors’ rights will be protected. Those who have committed offences will never benefit from these payments,” he said.

Accordingly, investors with a net investment amount of less than 1 million lira will be eligible for an interim payment up to that amount, whilst those with a net investment amount of 1 million lira or more will be eligible for an interim payment of up to 1 million lira. However, the payment may not exceed the investor’s net investment amount and will be limited to the resources available in the fund’s liquidation estate. The proposal is expected to be debated in the General Assembly of the Turkish Grand National Assembly and passed into law.

Akın Gürlek: 214 people made a profit of approximately 188 billion lira from three funds

Justice Minister Akın Gürlek announced that 214 people had been identified as having made profits in excess of 100 million lira from the liquidated funds. Speaking to the Sabah newspaper, Justice Minister Gürlek stated that 141 of these individuals were natural persons and 73 were legal entities.

The Justice Minister noted that these individuals had generated a total income of 187 billion 653 million lira from the three funds. At the heart of the fund crisis, which came to light following the sharp falls on the stock market in mid-September, lie 131 investment funds managed by seven portfolio investment companies.

The accounts of the 214 individuals and companies that earned 187.6 billion lira have been frozen

As part of an investigation conducted by the Istanbul Chief Public Prosecutor’s Office, examinations of the fund companies’ accounts revealed that 214 individuals and companies – 141 of whom were natural persons and 73 legal entities – had made a total profit of 187 billion 653 million from three funds. The Chief Public Prosecutor’s Office reported the identified individuals and companies to the Deposit Insurance Fund (TMSF). It was reported that the TMSF has begun issuing official notices to the individuals and companies on the list regarding the repayment of these profits.

As part of the investigation, the accounts of the 141 individuals and 73 companies alleged to have withdrawn substantial profits from the funds have been frozen. A travel ban preventing the individuals and company owners from leaving the country has also been imposed by court order.

Secret list: 141 people withdrew from the funds before the crisis

As part of the fund investigation, the question of who was privy to the secret investigation between the letter sent by the public prosecutor’s office to the Capital Markets Board (SPK) on 19 August and the liquidation decision on 17 September is being investigated. In the fund investigation being conducted by the Istanbul Chief Public Prosecutor’s Office, the number of suspects has risen to 220 and the number of detainees to 85, but new allegations regarding the scandal are emerging every day and the scale of the controversy is growing. The key issue at the heart of the scandal at present is the identity of the 141 people who withdrew from the system prior to the SPK’s intervention.

According to a report by Alican Uludağ of Deutsche Welle Turkey, it is claimed that these names were provided to President Recep Tayyip Erdoğan in the form of a list, whilst it remains unclear whether the public prosecutor’s office has taken any legal action regarding these individuals.

Taha Çakmak, General Manager of Türkiye Sigorta, has resigned

Taha Çakmak, General Manager of Türkiye Sigorta and Türkiye Hayat Emeklilik, has announced his resignation. Precautionary measures have been taken against Çakmak. A travel ban has been imposed on him as part of the precautionary measures concerning his assets.

Taha Çakmak was appointed General Manager of Türkiye Sigorta and Türkiye Hayat Emeklilik in August 2023. Çakmak had previously served as Deputy Chairman of the Banking Regulation and Supervision Agency (BDDK) and as Deputy Governor of the Central Bank.

Following his role as Head of Department at the Privatisation Administration of the Ministry of Treasury and Finance in 2019, Taha Çakmak served as Deputy Chairman of the Banking Regulation and Supervision Agency from 2019 to 2021, and as Deputy Governor of the Central Bank of the Republic of Turkey from 2021 to 2023. Çakmak, as of 3 August 2023, was serving as Managing Director and Deputy Chairman of the Board of Directors at Türkiye Sigorta and Türkiye Hayat Emeklilik.

DİSK-AR: The nine-month cost of inflation and taxes to workers is at least 2 trillion 254 billion TL

The Research Centre of the Confederation of Revolutionary Trade Unions of Turkey (DİSK-AR) has published its October 2026 Wage Loss Monitoring Report. According to calculations based on average registered workers’ wages, the report states that in the first nine months of 2026 , the cumulative total cost of tax and inflation to over 17 million insured workers amounted to at least 2 trillion 254 billion 221 million lira. The report noted that the cumulative financial loss suffered by insured workers due to inflation alone over this nine-month period exceeded 1 trillion 223 billion lira, whilst whilst the cumulative erosion caused by taxation was reported to have reached 1 trillion 31 billion lira.

The report, which highlighted that inflation and the income tax system have increased the burden on labour income, included the following statements:

“Due to the injustice of inflation and the income tax system, the working class has seen 2 trillion 254 billion lira of their wages eroded. Inflation is a siphon that impoverishes the working class. It takes from workers and transfers resources to the rich. Furthermore, the unfair tax system is further deepening income inequality and increasing the burden on wage earners. Ultimately, workers’ net disposable wages are rapidly falling below the level at which they should be protected against inflation.”

The total loss in the gross minimum wage in September was 11,782 lira

The report, which noted that the official nine-month inflation rate (CPI) stood at 24.32 percent as of September 2026 according to TÜİK data, stated that the net minimum wage had suffered a monetary loss of 6,828 lira due to inflation and that the purchasing power of the minimum wage had fallen to 21,248 lira. The report recorded the following regarding the losses incurred in September 2026 on the gross minimum wage of 33,030 lira due to deductions, inflation and tax:

“Minimum Wage: Over the nine-month period from January to September 2026, the total monetary loss in the minimum wage due to tax, deductions and inflation amounted to 83,360 lira. Consequently, the minimum wage eroded by a total of 28 percent over the nine months of the year. In September, the total loss in the gross minimum wage amounted to 11,782 lira.

Wages at Twice the Minimum Wage: For a worker earning a gross wage of 66,060 lira, the take-home pay fell to 35,081 lira in September 2026. Due to rising income tax brackets and the impact of inflation, 19,705 lira was deducted from the gross wage in taxes and deductions, whilst the loss of purchasing power caused by inflation amounted to 11,273 lira. The total loss over the nine-month period for this wage group was calculated at 216,647 lira (a 36.4 percent decline).

Wages at 2.5 Times the Minimum Wage: The total loss for this wage level during the January–September 2026 period reached 287,615 lira. The total erosion rate over the nine months of the year was 38.7 percent.

Wages at 3 Times the Minimum Wage: In the wage group with a gross wage of 99,090 lira, a loss of 32,491 lira was incurred in September 2026 due to tax and deductions, and 16,197 lira due to inflation. Whilst the purchasing power of the take-home pay fell to 50,402 lira, 49.1 percent of the gross wage was absorbed by tax, deductions and inflation. The total loss over nine months in this group amounted to 358,752 lira (a 40.2 percent erosion).”

Individual debts rose by 14 percent and non-performing individual loans by 36.2 percent in six months

Özgür Karabat, an MP for the New Party in Istanbul, stated that citizens in Turkey are taking on ever-increasing levels of debt, whilst their ability to repay that debt is weakening much more rapidly.

In a statement posted on his social media account, Karabat said, “What sort of economy is this? Debts have risen by 14 percent and non-performing loans by 36 percent in six months. Citizens in Turkey are taking on ever-increasing levels of debt. But the real danger lies elsewhere. The ability to repay debt is weakening much more rapidly. The picture emerging from the BDDK’s latest six-month data is dire. Let’s look at citizens’ debt. Debt, which stood at 6 trillion 171 billion TL on 3 April 2026, reached 7 trillion 35 billion TL on 2 October. That’s an increase of 864 billion TL in just six months,” he said.

Noting that individual credit card debt, which stood at 3 trillion 12 billion TL in April, had risen to 3 trillion 534 billion TL by the start of October, Karabat made the following remarks:

“An increase of 522 billion TL in six months. Approximately 60 percent of the total increase in individual debt stems from credit cards. Credit cards have now become a significant financing tool in the budgets of millions of households. The real danger, however, is that citizens are struggling to repay their debts. Non-performing individual loans, which stood at 278 billion TL in April, rose to 379 billion TL at the start of October.

A 36.2 percent increase in six months. During the same period, total individual debt grew by just 14 percent. In other words, non-performing loans are rising approximately 2.6 times faster than the debt stock.

Delinquent credit card debt is sounding the alarm. Credit card debt in arrears, which stood at 145.6 billion TL in April, rose to 170.2 billion TL in July and 199.8 billion TL in October. A 37.2 percent increase in just six months. The ratio of non-performing credit card debt to total credit card debt also rose from 4.83 percent to 5.65 percent.”

CHP MP Ömer Fethi Gürer also noted that the credit debt of those aged 66 and over had increased by 10 billion 334 million TL in one year, stating, “The rate of increase is 66.1 percent. What is even more concerning is that the number of people in this age group using credit has also risen from 205,983 to 263,500.”Highest monthly budget deficit of the year: 532.2 billion TL. The Ministry of Treasury and Finance has released the budget balance figures for September. The central government budget recorded its highest monthly deficit of the year in September. The monthly deficit in September stood at 532.2 billion TL. In August, the budget had recorded a surplus of 12.9 billion TL.In September, central government budget expenditure stood at 1 trillion 785.4 billion TL, whilst budget revenue was recorded at 1 trillion 253.1 billion TL. During the same period, non-interest budget expenditure amounted to 1 trillion 522.4 billion TL, and the non-interest deficit stood at 269.2 billion TL.In the January–September period, central government budget expenditure totalled 13 trillion 948.1 billion TL, budget revenue stood at 12 trillion 107.8 billion TL, and the budget deficit amounted to 1 trillion 840.3 billion TL. Furthermore, non-interest budget expenditure was recorded at 11 trillion 697 billion TL, whilst the non-interest surplus stood at 410.8 billion TL. Expenditure from the central government budget during the January–September period totalled 13 trillion 948 billion 130 million lira, whilst budget revenue reached 12 trillion 107 billion 800 million lira. Central government budget expenditure, which stood at 1 trillion 331 billion 1 million lira in September 2025, rose by 34.1 percent to 1 trillion 785 billion 391 million lira in September this year. Consequently, 9.4 percent of the 18 trillion 978 billion 815 million lira allocated for central government budget expenditure in 2026 has been utilised. In the non-interest balance, a deficit of 73 billion 22 million lira was recorded in September last year, whilst a deficit of 269 billion 202 million lira was recorded in the same month this year.

Central Bank reserves rose to 171.6 billion dollars

According to Central Bank data, total reserves rose by nearly 4.2 billion dollars in the week ending 9 October, reaching 171 billion 575 million dollars.

In the week ending 9 October, the Central Bank’s total reserves showed an increase of 4 billion 187 million dollars compared with the previous week. Total reserves rose from 167 billion 388 million dollars in the week ending 2 October to 171 billion 575 million dollars as at 9 October. The rise in gross foreign exchange reserves was the key factor behind this increase.

The CBRT’s gross foreign exchange reserves rose by 4 billion 241 million dollars during the week in question, climbing from 60 billion 326 million dollars to 64 billion 567 million dollars. Meanwhile, a slight decline was recorded in gold reserves during the same period. The value of gold reserves fell by 54 million dollars, dropping from 107 billion 62 million dollars to 107 billion 8 million dollars.

Current account surplus exceeds expectations

The current account recorded a surplus in August, following on from July. The current account balance showed a surplus of 4 billion 53 million dollars in August, whilst the current account balance excluding gold and energy also recorded a surplus of 8 billion 205 million dollars. Economists had expected the current account surplus to stand at around 3.8 billion dollars.

According to the Central Bank’s statement, based on annualised data, the current account deficit stood at approximately 42.1 billion dollars in August, whilst the balance of trade, as defined by the balance of payments, recorded a deficit of 78.4 billion dollars. Net inflows from direct investment were recorded at 141 million dollars in August. Portfolio investments recorded net outflows of 1.03 billion dollars in August.

Şimşek: Current account deficit will remain at manageable levels

Mehmet Şimşek, Minister of Treasury and Finance, stated that the current account deficit would remain at manageable levels, thanks to the increase in goods exports and the resilient performance of service revenues. Recalling that a current account surplus of 4.1 billion dollars was recorded in August, Minister Şimşek said: “The annualised current account deficit stood at 42.1 billion dollars. We anticipate that the current account deficit will remain at manageable levels, thanks to the increase in goods exports and the resilient outlook for service revenues,” he said.

Şimşek posted the following on his X account: “At a time when risks to global energy supply are rising, our diversified supply sources and robust infrastructure are underpinning our energy supply security. The 1.1 trillion dollars paid for energy imports over the last 26 years equates to 1.6 times the total current account deficit for the same period and twice the current gross external debt stock. This picture highlights the strategic importance of the green transition for our country.

Citi expects Turkey’s current account deficit to widen

Citigroup economists expect Turkey’s current account deficit to widen by the end of 2026, driven by rising energy prices resulting from the conflicts in the Middle East. The current account deficit as a percentage of Gross Domestic Product (GDP) is forecast to rise from 1.9 percent at the end of 2025 to 2.7 percent by the end of 2026.

Commerzbank’s analysis of the Turkish lira: Not close to fair value

According to Commerzbank, the faster short-term depreciation of the Turkish lira observed in recent months has not brought the currency closer to its fair value, nor does it eliminate the risk of further losses in the future. According to a report on BloombergHT, Commerzbank economist Tatha Ghose wrote in a report published on Thursday 15 October that the nominal depreciation of the lira, which has stood at around 20 percent on an annualised basis in recent months, “has not been fast enough to offset the real appreciation or necessarily move the exchange rate towards its fair value”. Ghose stated that he had “not observed any noticeable acceleration in the pace of depreciation in recent days or weeks”, but that the Turkish lira was “in any case on a steady and rapid depreciation trajectory”. Nevertheless, Ghose noted that, given that inflation is running at between 30 and 35 percent, “an annualised depreciation rate of 20 percent implies that the real exchange rate in Turkey continues to appreciate”.

World Bank provides 21 billion dollars to Turkey over four years

The World Bank Group reported that the total amount of private sector capital mobilised in Turkey since 2022 has exceeded 21 billion dollars. According to the statement, a historic record was set in the mobilisation of private sector capital in developing countries in the 2026 financial year. Globally, private sector capital mobilised has more than tripled over the last four years, rising from $35 billion in the 2022 financial year to $112 billion in the 2026 financial year.

In Turkey, the World Bank Group mobilised $5.4 billion in private sector capital in the 2026 financial year. This figure represents a 520 percent increase compared to 2022. Whilst the total private sector capital mobilised in Turkey since 2022 has exceeded $21 billion, Turkey ranked among the countries with the highest amount of private sector capital mobilised globally by the World Bank Group.

Extending the gas agreement between Turkey and Iran for a further five years is on the agenda

The extension of the contract between Turkey and Iran—which provides for the annual purchase of 10 billion cubic metres of natural gas and was due to expire on 30 July—by five years is on the agenda. The 25-year natural gas agreement between Turkey and Iran, one of Turkey’s most important suppliers, expired on 30 July. It is reported that the agreement may have been renewed under an automatic extension clause.

In response to a query from the ANKA News Agency, industry sources emphasised that the natural gas supply agreement contains certain critical clauses, stating: “Unless Turkey and Iran stated, ‘We are not extending this agreement’ a certain period before the agreement’s expiry, the agreement is automatically extended for a further five years. This clause may have come into effect, and the extension of the term may now be on the agenda.”

Turkey, whose annual consumption stands at around 55–60 billion cubic metres, meets a significant portion of its natural gas requirements through imports, either via pipelines or as liquefied natural gas (LNG). Last year, Russia accounted for the largest share of gas imports at 36.27 percent. Azerbaijan ranked second, followed by the US in third place. Iran ranked fourth, with imports of 7.7 billion cubic metres and a 13.2 percent share.

International Energy Agency issues warning over diesel crisis

The International Energy Agency (IEA) has reported that, despite the weak outlook for oil consumption, stated that global supplies of diesel and other fuels will remain under pressure next year as a result of conflicts in the Middle East and Russia.

In its monthly report, it stated: “Despite low demand, whilst limited middle distillate supplies are likely to persist until 2027, oil market balances are forecast to remain in deficit until the end of the year.” The IEA noted that high prices and supply constraints are putting pressure on global demand, with demand set to fall by 2.5 million barrels per day this quarter and facing a weaker outlook. Diesel accounts for 25 percent of this decline.

Another U-turn from Trump: Diesel deal struck with Russia

Rising energy prices fuelled by the Iran conflict are increasing the pressure on US President Donald Trump. Under an agreement between the US and Russia, the Russian government will supply millions of tonnes of diesel fuel to the US and global markets.

In a statement on social media, US President Donald Trump said that he had reached an agreement with Russian President Vladimir Putin on the supply of diesel fuel. The Republican leader stated: “An agreement has been reached for Russia to supply over 300,000 tonnes of diesel fuel to the American and global markets immediately, a further 500,000 tonnes throughout November, and 1 million tonnes shortly thereafter.”

He added that, depending on the status of its diesel refineries, Russia would deliver 3 million tonnes of diesel fuel in the near future.

Trump, who claimed that the Washington administration had ‘full control’ over the Strait of Hormuz, argued that as a result of this agreement, diesel prices in the US and around the world would fall rapidly to record lows.

German leader Merz reacts to fuel deal with Russia

German Chancellor and Chairman of the Christian Democratic Union (CDU), Friedrich Merz, said that the agreement reached between the US and Russia on diesel fuel exports could not apply to Germany or Europe.

Ukrainian President Volodymyr Zelenskyy, meanwhile, reacted strongly to the US-Russia diesel agreement and said he would resume attacks on Russian oil refineries.

Russian Deputy Prime Minister Alexandr Novak also commented on the Russia-US diesel agreement, saying, “Russia and the US will supply diesel fuel to global markets; the first shipments have begun.”

Houthi attacks are driving up oil prices

Oil prices are remaining high as the market assesses the impact of increased supply risks stemming from the conflict between the Iran-backed Houthis in Yemen and Saudi Arabia, alongside expectations of rising diesel exports from Russia.

On Wednesday 14 October, the price of a barrel of Brent crude rose to $106.58, whilst on Friday 16 October it was trading at $105.33. The price of a barrel of US West Texas Intermediate (WTI) crude, meanwhile, exceeded the $98 mark, trading at $97.23 on Friday morning.

Hiroyuki Kikukawa, Chief Strategist at Nissan Securities Investment, stated that supply concerns arising from the clashes between the Houthis and Saudi Arabia were driving prices higher. Kikukawa noted that expectations of Russia increasing its diesel exports could alleviate supply tightness in the markets and limit sharp price movements.

The Saudi Arabian Ministry of Energy announced that the Houthis had attacked an administrative building belonging to the state-owned oil company Saudi Aramco in the eastern city of Dhahran, causing a small fire. Riyadh International Airport was targeted four times, and 13 people lost their lives in Saturday’s attack.

According to data released by OPEC on Tuesday 13 October, Saudi Arabia increased its oil production last month despite disruptions to shipments caused by the US-Iran conflict. This development contributed to a significant rise in production by the OPEC+ group, which includes Russia.

US inflation hits five-month high in September

In the US, the Consumer Price Index (CPI) recorded its fastest rise in the last five months due to rising fuel costs, whilst the indicator reflecting core price pressures also remained at a high level.

In September, the Consumer Price Index rose by 0.6 percent month-on-month and 3.7 percent year-on-year. This marked the highest annual inflation rate in five months. Economists surveyed by Bloomberg had forecast a monthly rise of 0.6 percent and a year-on-year increase of 3.6 percent. In August, inflation stood at 0.4 percent month-on-month and 3.4 percent year-on-year.

Core inflation came in at 0.3 percent month-on-month, compared with a forecast of 0.2 percent, and 2.6 percent year-on-year, compared with a forecast of 2.5 percent.

As the mid-term election campaigns enter their final stretch, the economy – and prices in particular – remain the most important issues on voters’ minds. The rise in inflation makes it likely that the Fed will maintain its course of further raising interest rates in the coming months.

At the start of the year, inflation had fallen to its lowest levels since early 2021. However, the war caused prices of petrol, diesel and other products to rise rapidly, driving up inflation and, ultimately, borrowing costs.

PPI at its highest level in over four years

The Producer Price Index (PPI) also rose by 6.3 percent year-on-year in September, exceeding forecasts. Economists surveyed by Bloomberg had expected a rise of 5.4 percent. The PPI had risen by 5.6 percent the previous month. The PPI rose by 1.3 percent month-on-month. The expectation was for a monthly rise of 0.6 percent.

Energy prices rose by 10.8 percent in September, whilst transport and storage prices increased by 3.4 percent. Food prices, meanwhile, rose by 1.2 percent. Excluding food and energy, the PPI rose by 0.7 percent last month, compared with an expected 0.3 percent. The core PPI, compared with the previous year, rose by 5 percent. The forecast was 4.4 percent.

Dollar index at an 18-month high

The dollar index reached 102.55 on Thursday 14 October, driven by ongoing geopolitical risks in the Middle East, expectations that the US Federal Reserve (Fed) may raise interest rates, and the weakening of the euro,

marking its highest level since April 2025. The index briefly touched the 103 mark. It had last reached 103.02 in April 2025.

The dollar index, which measures the value of the US dollar against the euro, the Swiss franc, the Japanese yen, the Canadian dollar, the British pound and the Swedish krona, continues to hold firm as escalating tensions in the Middle East threaten energy supplies and hawkish expectations regarding the Fed, whilst losing some momentum, still persist.

Beth Hammack, President of the Cleveland Fed, stated that adopting a restrictive monetary policy stance would be appropriate to ensure inflation returns to the 2 percent target.

The euro is falling, whilst US Treasury yields are rising

Meanwhile, persistent financial concerns in France are causing a decline in the value of the country’s assets, whilst questions over whether these risks could spread across the region are increasing pressure on the euro.

Amid these developments, the euro continues to weaken against the dollar. The euro/dollar exchange rate has fallen to 1.11, reaching its lowest level in approximately 17 months.

In addition to these developments, US Treasury yields, which remain at high levels, have also contributed to the dollar’s appeal. The fact that the yield on the 10-year US Treasury bond remains above the 5 percent mark is causing the yield spread with other countries’ assets to widen in the US’s favour. China’s trade surplus is heading towards a new record. China’s trade surplus reached $938 billion in the first nine months of the year, as exports rose more than expected in September. This development signalled that the country is on track to surpass the annual record it set last year. Meanwhile, a report by the German Economic Institute (IW) stated that Germany’s trade deficit with China is expected to exceed 100 billion euros for the first time this year. The report used data to illustrate how the balance of competition in global markets has shifted to the detriment of German industry. Volkswagen’s global sales decline accelerates. Whilst the deepening contraction in the Chinese market and increasing local competition are negatively affecting the sales of the Volkswagen Group, Europe’s largest automotive manufacturer, the decline in the company’s global deliveries accelerated in the third quarter of the year. The Volkswagen Group’s global sales fell by 14.3 percent in the third quarter. During this period, sales of passenger cars under the Group’s flagship brand, Volkswagen, fell by 19.3 percent to 946,600, whilst total deliveries for the ‘core brand group’ – comprising Volkswagen passenger cars, Škoda, SEAT/CUPRA and Volkswagen commercial vehicles – fell by 14 percent to 1,430,900.In China, the company’s largest market, intense price competition with local electric vehicle suppliers and a contraction in the domestic market were the main reasons for the weak performance. In the third quarter, the group’s vehicle deliveries in China fell by 38.5 percent to 405,800.

During this period, the group’s electric vehicle sales fell by 86.4 percent to 5,100, driven in particular by the expiry of incentive schemes and the pressure of customs tariffs in the US market.

Cyberattack on supermarkets in France: tonnes of food destroyed

A cyber attack on supermarkets in France affected hundreds of shops, forcing the destruction of tonnes of food. The incident has heightened concerns across Europe regarding the security of critical infrastructure.

France’s leading retail chains, E. Leclerc, Intermarché and Cooperative U, announced that they had been hit by a cyber attack targeting the refrigeration systems in their shops. It was reported that the attack affected at least 300 stores belonging to Intermarché and its subsidiary Netto, more than 100 Cooperative U branches and a large number of E. Leclerc stores. Dominique Schelcher, CEO of Cooperative U, described the attack as “unprecedented” in a statement to the AFP news agency.